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The price of corn dropped nearly 2 percent after the government forecast a smaller harvest than had been previously anticipated and weaker demand for the grain.
Corn for December delivery dropped 13.5 cents to end at $7.04 per bushel Wednesday. It had climbed shortly after the U.S. Agriculture Department's forecast was released.
The closely watched forecast, which is issued every month, caught traders off guard because the cuts in the agency's forecasts were steeper than had been expected. Many traders sold appreciated contracts to lock in profits following a 28 percent surge in the price of corn since June 1.
Farmers are expected to produce nearly 13 billion bushels of corn this year, about 12 percent less than the 14.8 billion bushels the agency forecast a month ago. The yield estimate fell to 146 bushels per acre from 166 bushels per acre in the June report.
A persistent spell of hot, dry weather has baked much of the Midwest for the past month, just as corn was at a critical pollination stage. If the agriculture agency's forecast proves true, it will leave corn inventories at low levels heading into the winter.
The smaller crop and higher prices are expected to reduce demand by nearly 8 percent from food, seed and industrial customers and overseas buyers, based on the new government estimates. The agency also predicted that U.S. growers will face more competition from South American producers.
"If you're not producing anything, you can't sell it," said Jack Scoville, vice president at Price Futures Group. "Prices are good and high, let's face it, and I think that's in the back of everybody's mind as well, how high is high?"
Soybeans also are suffering in the hot weather. The USDA lowered its forecast for soybean production to 3.05 billion bushels from 3.21 billion bushels in the June report. The expectation for demand was 3.105 billion bushels, compared with 3.26 billion bushels in June.
Soybeans for November delivery fell 16 cents to finish at $15.225 per bushel. September wheat rose 5 cents to $8.2625 per bushel.
Other commodities were mostly higher.
Gold for August delivery fell $4.10 to finish at $1,575.70 per ounce and September silver rose 14.1 cents to $27.023 per ounce. September copper gained 4.95 cents to $3.4475 per pound, October platinum increased $1.90 to $1,431.60 an ounce and September platinum rose $6.35 to $582.95 per ounce.
Benchmark oil rose $1.90 to end at $85.81 per barrel in New York. Heating oil gained 4.23 cents to $2.7618 per gallon and wholesale gasoline increased 2.2 cents to $2.7689 per gallon. Natural gas jumped 11.6 cents, or 4.2 percent, to $2.853 per 1,000 cubic feet.